Thursday, April 26, 2007

I know Y Combinator and CRV Quickstart, you are no Y Combinator. (lower
risk, more capital)

Even though this article compares the two, funding Michael Phillip's Mobeus, CRV Quickstart has demonstrated just how different they really are from Y Combinator. At the outset, CRV Quickstart was mentioned in the same breath with both TechStars and the prototype early stage venture fund YC. This may be a stretch to focus on the similarities, when the structures of the firms determine that different types of opportunities need to be considered.

Michael Phillips is a proven serial entrepreneur that took his last company Speechworks, all the way to an IPO. Not a bad investment at all, he is the prototype candidate for funding by the VC’s. But why put him through the Quickstart program? Well for CRV, it is not a bad idea to quickly tie up a deal with a bridge loan, knowing that there is a high probability that Mobeus will get funded, therefore locking in at least a 50% of the series A investment with a proven CEO. But it doesn't look at all like a YC deal. Maybe they will mix in some higher risk founders as they go along. It must be fun and informative to be able to see all the ideas from hundreds maybe thousands of decks coming across the transom.

The Mobeus investment does seem to validate the potential problems mentioned by Josh Kopelman and Fred Wilson concerning the ability of larger VC funds to manage the deal flow required of seed funding.

It reminds me of the Comcast phone commercial where the guy with all-over tiger tattoos is re-calling the tattoo parlor to get his tattoos removed , hoping that his new phone service will produce a new answer. It doesn’t and you hear the tattoo artist tell the guy “ you a tiger now”.

Well at this point, naming a new program and vetting some emails does not make you a YC (that link is hilarious BTW) , and it looks like it may not be so easy to lose your stripes. For now CRV is still a tiger. I am hoping to see some deals come out of Quickstart that look more like YouTube or Reddit, but betting on proven winners can't really be faulted, it is just not that similar to YC.

Those are some tasty multiples for sure but there aren't going to be too many more YouTube, Delicious, Reddit, JumpCut, et. al kind of acquisitions.

It's a classic build vs. buy decision except in the case of YouTube and anyone making it out to be anything more than that is really deluding themselves about how sticky they think these sites really are.

I was referring more to the make up of the company. unproven founders with an interesting idea. My point is that CRV just used quick start to lock up an already proven founder, rather than make a bet on a early stage deal like YC does.